By Jacob Bunge Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- A small U.S. derivatives exchange on Thursday rolled out contracts that allow traders to take bearish positions on European stocks affected by new short-selling restrictions, highlighting the tough task regulators can face in trying to limit market activity. OneChicago LLC developed the contracts in the week since the tougher short-selling rules were introduced in an effort to limit market declines, with products linked to exchange-traded funds composed of stocks listed in France, Spain, Italy and Belgium. "This is another way to get exposure to those markets without touching those foreign exchanges," said David Downey, chief executive of OneChicago. "When we heard about the short-selling bans in those countries I instructed our staff to go through and find any ETFs based on those countries' markets that we did not currently list for trading." Downey said in an interview that he didn't anticipate a sharp upswing in volume, but large banks and other financial institutions with long exposures to the affected European markets would be potential users. Ten-year-old OneChicago's core business is trading futures contracts on individual stocks and exchange-traded funds. The bulk of its offerings are linked to U.S.-listed securities, but the platform offers 228 contracts on American Depository Receipts, which allow traders on U.S. exchanges to buy and sell stock in foreign companies. Another 21 contracts are on ETFs made up of nondomestic stocks. Trading futures on individual securities lets investors position for the price of a stock or ETF falling, achieving a similar outcome to short-selling. That practice involves borrowing shares and selling them to another investor, with the aim of buying them back more cheaply later when the price has fallen and pocketing the difference. France, Spain, Belgium and Italy last week banded together to restrict short-selling of stocks as pressure mounted on the euro zone's financial sector. Regulators hoped to stave off a piling-on of bearish bets that some feared could destabilize banks central to the region. While European short-selling bans extend to short positions achieved through trading of derivatives, short-selling of related ADRs in the U.S. remains permitted, enabling OneChicago to continue offering the related futures contracts its market. The newly listed futures track anticipated movements in French, Spanish, Italian and Belgian ETFs compiled by MSCI Inc. (MSCI). OneChicago is jointly owned by Interactive Brokers Group (IBKR), CBOE Holdings Inc. (CBOE) and CME Group Inc. (CME). -By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com
